Defense industry news, analysis and commentary

In this exclusive article for Breaking Defense, President of Monitor National Security Ajay Patel and retired U.S. Navy Rear Admiral and Senior Advisor Ben Wachendorf claim the impact of looming defense budget will be much worse than expected.

Defense Secretary Leon Panetta has warned Congress about the potentially catastrophic impact of the $500 billion in Super Committee cuts on defense capabilities. Will the cuts truly be as deep and long-lasting as predicted? If history is a guide – no – they will be worse.

A graphic in our recent study of defense budgets shows a roller-coaster ride of dramatic peaks and valleys. Following the Vietnam era buildup was a precipitous decline. Then came the soaring expenditures of the Reagan era and First Gulf War followed by the deep dive of the “peace dividend” period. The horrors of 9/11 induced the sharpest climb with over $1.5 trillion of defense increases (in constant fiscal 2012 dollars) over the next 10 years. That was over twice the increase in constant dollars of the ten year periods associated with the war in Vietnam and the Reagan – Gulf War I buildup.

Most significantly for today’s discussion, the decreases in defense spending following past sustained periods of defense budget growth have always lasted longer and gone substantially lower than the Pentagon predicted. During the last sustained decline, Pentagon planners consistently underestimated the magnitude and duration of defense cuts in the out years.

In fact, it took over five years before the planners caught up with reality. While some of this lag is an outcome of the long planning cycle that starts nearly two-years prior to the enacted budget, much can also be attributed to systemic and persistently optimistic biases that are inherent in strategic planning and budgeting processes in both the public and private sectors. Post-conflict reductions in defense spending were in the low-to-mid 30 per cent range after the two past conflicts. We would not be surprised to see a similar drop in the coming years.

There are several factors that will distinguish the forthcoming period of decline in defense spending from those which followed the Vietnam War and Reagan buildups. For the first time, legislation is imposing limits on defense spending over a 10-year period. In the past there were five-year spending plans –-but in fact the out year spending estimates were just that – estimates – and did not receive close Congressional scrutiny.

Also, the Joint Congressional Committee and its highly compressed timelines and triggering actions will require a significant change from recent highly polarized political debates or mandatory large cuts to defense spending. Finally, the absence of a near term peer military threat and the presence of more amorphous diverse threats from terrorism, failed states, and ethnic/religious conflict will cloud the argument. Policy makers and pundits will debate over forward deployed versus garrisoned forces, hard versus soft power, and the virtues and limits of multilateral-ism. The answers to all these debates will have a significant impact on the budget outlook.

Regardless of the amount of defense spending cuts that are eventually implemented, a new calculus will have to be developed between political doctrine, national security strategy, force structure and investments to maintaining existing capabilities and develop new ones. Large cuts in personnel are on the horizon, particularly for the Army and Marine Corps while both struggle to avoid the “hollow force” which plagued the U.S. in the early ’80s. The Navy will have to make painful tradeoffs in the types of ships it can afford to build and operate while the Air Force will struggle with replacing large numbers of fighter and bomber aircraft nearing the end of their service life while also investing in space and cyberspace.

Expect draconian cuts in areas like the nation’s triad of strategic nuclear forces and contentious debates regarding the right mix of manned and unmanned platforms.

The outcome of any of these debates is unknowable at this time. One thing, however, is certain. Those who work for, invest in or rely upon the defense industry – and that means all Americans — are in for some sharp changes.